Shortly before closing on a new home, you will be given a Department of Housing and Urban Development Settlement Statement, also called the HUD-1. This is your final account of all of the costs and figures related to the deal. Many of the fees listed in the HUD-1 form would also have been included in the Good Faith Estimate (GFE) of mortgage costs that you would have received from your lender; however, the HUD-1 amounts are final.
You may find some of the HUD-1 figures are different from those in your GFE. This could be because third-party fees such as appraisal fees ended up being slightly different than originally estimated. However, if there are large discrepancies, or new fees that weren’t in the GFE, check with your lender to see if there’s a mistake that needs to be corrected.
Here’s a look at the main parts of the HUD-1 form. In each part, there is one column showing the buyer’s (or borrower’s) figures and another for the seller’s. We will concentrate on the buyer’s side.
Sections A through I (General Information)
The form starts with basic information about your loan, the buyer, seller, borrower, and the property.
Section J (Summary of Borrower’s Transaction)
Section J shows the gross totals of your costs, your credits, and the net amount you owe for your purchase. It lists the totals by category:
- 100. Gross Amount Due From Borrower: The amount you owe, consisting of the property purchase price, the fees or settlement charges, items such as appliances bought from the seller and payment of taxes the seller has prepaid. (Line 120 is total.)
- 200. Amounts Paid By Or In Behalf of Borrower: The amounts you have paid, such as your deposit, or financed, such as your mortgage or a mortgage you are assuming. It also includes any sums the seller owes you, such as unpaid taxes, utility costs or allowances for repairs. (Line 220 is total.)
- 300. Cash at Settlement From/To Borrower: The actual amount of cash you must bring to the settlement, which consists of the gross amount from Line 120 minus your credits from Line 220. (Line 303 is total.)
Section K (Summary of Seller’s Transaction)
This column lists the gross amount due to the seller, along with any necessary adjustments for items such as taxes that the seller has paid in advance or left unpaid.
Section L (Settlement Charges)
Section L, on the second page of the form, shows all the specific costs for financing and processing of the transaction. It includes:
- 700. Total Sales/Broker’s Commission based on price: The commission charged by the real estate broker.
- 800. Items Payable In Connection With Loan: The loan origination fee, any discount points paid to reduce the mortgage rate, the appraisal fee and credit report fee, the application fee for mortgage insurance, and the assumption fee, if you’ve assumed an existing mortgage. Fees you’ve paid up front are marked P.O.C. (paid outside of closing) and will not be included in the total on Line 1400.
- 900. Items Required By Lender To Be Paid In Advance: The interest on the loan for the period before the first monthly payment, and the initial mortgage insurance and hazard or home insurance premiums (often covering the first year).
- 1000. Reserves Deposited With Lender: These are escrow items, which the lender holds to cover future expenses such as property taxes and annual assessments. In some cases, you may be asked to remit future hazard and mortgage premiums as escrow items. There is a maximum that can be charged.
- 1100. Title Charges: The costs of changing ownership of the property, such as the settlement or closing fee, title examination fee and attorney’s fee. If the fee is payable to a third party, such as the notary or attorney, it is indicated. If one agent performs more than one service, the fees may be lumped together on one line.
- 1200. Government Recording and Transfer Charges: City, county and state taxes or stamps needed to transfer ownership are listed here. The buyer often pays the deed and mortgage recording fees.
- 1300. Additional Settlement Charges: Items such as surveys, inspections for such things as pests and lead-based paint, and home warranties.
- 1400. Total Settlement Charges: The sum total of all of the above fees. The amount listed in the buyer’s (or borrower’s) column should be identical to the amount listed as “settlement charges to borrower” on page one, line 103, while the amount in the seller’s column should be the same as the “settlement charges to seller” on page one, line 502.
It’s important to read through the HUD-1 form carefully and determine that it’s complete and accurate. You and the settlement agent will then both sign it to authorize payment of the funds. Once that’s done, the home is yours.